Use the Table for the Question(s)below

question 20

Multiple Choice

Use the table for the question(s) below.
Consider the following prices from a McDonald's Restaurant:
-A McDonald's Big Mac Extra Value Meal® consists of a Big Mac Sandwich,Large Coke,and a Large Fry.Assume that there is a competitive market for McDonald's food items and that McDonald's sells the Big Mac value meal for $4.79.Does an arbitrage opportunity exist and if so how would you exploit it? How much would you make on one extra value meal?

• A)Yes,buy the Big Mac Extra Value Meal® and then sell Big Mac,Coke,and Fries to make arbitrage profit of $0.68.
• B)No,no arbitrage opportunity exists.
• C)Yes,buy Big Mac,Coke,and Fries then sell the Extra Value Meal® to make an arbitrage profit of $1.09.
• D)Yes,buy a Big Mac,Coke,and Fries then sell the Extra Value Meal® to make an arbitrage profit of $0.68.

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